Wednesday, August 22, 2012

Mozambique's Debt Burden: Sympathy Is Not Enough

There are lots of reasons for going into debt, some more likely to inspire sympathy than others. Take, for example, former baseball player Jose Canseco, whose financial troubles arose from multiple divorces that allegedly cost him $15 million, one of which may have been brought on by a 1990 incident in which Canseco crashed his Porsche into his then-wife’s BMW. Mr. Canseco tried desperately to pay off his debts, but neither his stint as a celebrity boxer (he had his twin brother fight for him and hoped nobody would notice….somebody did) nor his recent sojourn at the age of 47 into the Mexican baseball league (where he was banished for testing positive for steroids) seems to have done the trick. In this economy, it’s tough to feel too sympathetic for Jose. On the other side of the coin are the parents asked to pay off the student loans of their dead child and the millions of Americans who have lost their homes and/or their jobs in the financial meltdown through no fault of their own and who have never once asked their twin brother to fight for them in a celebrity boxing competition. If the same sympathy scale can be applied to countries, then the southern African nation of Mozambique is distinctly un-Canseco-like. From colonialism to a brutal war initiated and sustained by external nations to a series of natural disasters, the list of explanations for Mozambique’s debt burden is long and the level of sympathy it evokes is substantial. Sympathy, however, is not going to help one of the world’s poorest countries feed its people and set itself on a path to economic prosperity. Mozambique, like many developing nations, needs debt forgiveness now.

Mozambique had the misfortune of being colonized by Portugal, whose former colonies in Africa (along with those of Belgium) have a statistical predilection for post-independence civil wars (including Angola, the Democratic Republic of the Congo and Rwanda). Two hundred thousand Portuguese settlers lived in Mozambique and asserted their colonial “right” to take the best lands and dominate society.A Mozambican independence movement known as Frente de Libertacao de Mocambique (FRELIMO) was founded in 1962, and by 1975 had forced Portugal out and established the Mozambican state. Portuguese settlers fled, but not before destroying farms, equipment, wells and anything else of value on their way out. Unfortunately for Mozambique, this destruction was a fraction of what would be wreaked upon the country in the coming years. At the time of Mozambique’s independence, two of its neighbors were still under minority-white rule: Rhodesia (now Zimbabwe) and South Africa. The new Mozambican government supported the independence movements in both countries and abided by UN sanctions against Rhodesia, actions which led the Rhodesian intelligence service to create the Resistencia Nacional Mocambicana (Renamo), a rebel organization that could be called something other than a terrorist group only by individuals with advanced degrees in Orwellianism. “Renamo bands entered Mozambique to burn villages, plunder agricultural cooperatives, attack railroad lines and establish re-education camps…In August 1976, [Rhodesian militias allied with Renamo] massacred more than 600 refugees in a camp.”[i] The end result was a 16-year civil war that was catastrophic for Mozambique, which “by the late 1980’s…had dissolved into one of Africa’s greatest humanitarian disasters, with the state moving toward total collapse.”[ii] The New York Times estimated in 1990 that the civil war caused 100,000 deaths and turned 800,000 Mozambicans into refugees.[iii] Alessandro Rebucci of the IMF states unequivocally that while the civil war certainly wasn’t the only factor, it was the primary cause of Mozambique’s external debt burden. By 1984, the first “official estimate of Mozambique’s nominal stock of public gross external debt” stood at $2.4 billion, a staggering 50% of GDP.[iv] By 1990, the World Bank estimated Mozambique’s external debt at $4.6 billion, and by 1995 it was $7.5 billion.[v] When the civil war came to an end in 1993, Mozambique had the highest debt burden per GDP in the world.[vi] Meanwhile, heavy flooding in the late 1970’s caused nearly $100 million in damages and was followed by a severe drought that plunged a huge number of Mozambicans into a state of food emergency.[vii]This in turn was followed by more flooding, all of which took place during the height of the catastrophic civil war. Certainly all of this invokes sympathy, which is better than nothing. On the other hand, sympathy may well be the most overrated characteristic of the West in its relations with the rest of the world; perhaps just ahead of the propensity to throw millions of dollars at a problem in the vain assumption that western knowledge will solve it. What Mozambique needs will be found not in an excess of sympathy but rather in a very different conception of the nature of Africa’s external debts, a conception that does not begin with the assumption that the people of a country are responsible for every dollar borrowed by their government. In the case of a country like the Democratic Republic of the Congo (DRC), where kleptocrat Mobutu Sese Seko stole billions of dollars from his people while ruling with an iron fist and those very same people are now being asked to pay back those very same billions, this new conception is intuitively reasonable. In the case of Mozambique, however, it must be taken one step further: in the case of hostile and unwarranted foreign aggression, the government itself may not always be held responsible for its own borrowing. This idea can be traced to the Treaty of Versailles at the end of the First World War, where the allies determined (quite self-righteously) that Germany was to pay reparations for the cost of the war. In World War I, it is safe to say that there was a fair amount of blame to go around, and that reparations were a form of victor’s justice. But now imagine the same scenario playing out after World War II; was it fair that the shell-shocked citizens of London had to bear the brunt of the cost of rebuilding their city after it was destroyed by a foreign country with entirely hostile intentions? And now imagine a country with a fraction of the means of an economic power like the United Kingdom, a country where the violence lasted not six years, but sixteen, a country where the infant mortality rate is over 9% and the life expectancy is less than 50 years. Who owes whom? --- Mozambique’s total external debt stock dropped to just over $4 billion in 2005 and less than $3 billion in 2006 due to Heavily Indebted Poor Country (HIPC) Initiative debt forgiveness from the World Bank and IMF.[viii] It began to rise again the following year, however, and topped the $4 billion mark once again in 2009.[ix] This is the tragedy of Africa’s external debts: even substantial debt relief cannot wipe away the billions of dollars lost over decades to debt service and stagnated economies. External debt hampers growth (Jubilee UK notes that Malawi’s economy grew by an average of 8.5 per cent a year between 2006 and 2009 [after debt relief] compared to 2.5 per cent a year from 2002-2005 [before debt relief]) and leaves countries in need of financial stimulus, which leads to further debt.[x] Renamo may be just an unarmed political party in today’s Mozambique, but its legacy continues to threaten the lives of the Mozambican people. If the West insists on collecting on Mozambique’s debts, perhaps it should give South Africa a call, and ask if anyone knows which way the Apartheid government went after it left the pages of history.

[vi] Plank, David, “Aid, Debt, and the End of Sovereignty: Mozambique and Its Donors,” The Journal of Modern African Studies, 1993. http://www.jstor.org/discover/10.2307/161203?uid=3739560&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21101138759697

About Me

I am a graduate of the University of San Francisco's master's in International Studies Program, where I wrote my thesis on Odious Debt in Sub-Saharan Africa. This site will focus on African issues, particularly debt, politics, and U.S. foreign policy. I hope you find it interesting.
email: andrew.hanauer@gmail.com